Cocaine for Venezuela Fuel Tankers Irks Colombia Tax Boss

Venezuela, which has the world’s largest oil reserves, subsidizes fuel to help low-income earners, maintain social stability and contain inflation that reached 54.3 percent in October. Photographer: Meridith Kohut/Bloomberg

Dec. 2 (Bloomberg) -- Criminal gangs are shipping the
equivalent of 60 to 100 tanker trucks of subsidized Venezuelan
fuel per day into Colombia, much of it paid for with cocaine,
according to the Colombian government.

Between 10 percent and 15 percent of fuel used by Colombian
drivers is smuggled from neighboring countries, Juan Ricardo
Ortega, the head of the nation’s tax and customs agency DIAN,
said in a Nov. 28 interview in Bogota. That’s led to a slump in
fuel duties collected by the government and a warning to BHP
Billiton Ltd., Anglo American Plc. and Glencore Xstrata Plc.’s
Cerrejon coal complex over the source of fuel for its trucks.
Cerrejon said it’s investigating the situation.

Tankers are loading up on gasoline and diesel purchased
near the border in Venezuela’s Zulia state for about one cent a
gallon and driving into Colombia abetted by corrupt government
officials and local politicians, according to Ortega. The
Colombian state has “zero control” over the border province of
La Guajira in the northeast of the country, which has a
centuries-old smuggling tradition, Ortega said.

“Clearly the DIAN, the Governor of the department,
employees of the department and the police are incredibly
corrupt,” he said. “In Venezuela, the state police are
particularly involved. They lost all control of the police in
Zulia.”

The Colombian police force’s press office in Bogota didn’t
respond to two emails and a phone call from Bloomberg News
seeking comment. The Zulia state police in Venezuela didn’t
respond to an e-mail and voice mail requesting comment.

Civil Unrest

From the Colombian border towns, the contraband fuel is
distributed to cities along the Caribbean coast and to Bogota
about 500 miles away, often mixed with legal fuel, Ortega said.
Smuggled fuel is also brought in over other parts of the roughly
1,300-mile (2,100 kilometer) border, carried in cars and trucks
and loaded onto mules.

Ortega, 46, a Yale-educated economist whose father was
Colombia’s central bank governor, said his efforts to shut down
La Guajira smuggling routes have been thwarted by unrest in the
local population, many of whom earn a living from contraband
food, liquor and fuel.

“We’ve tried three times to close the border, and it isn’t
difficult - you put boots on the ground and trucks can’t get
past,” he said. “But the people at the border start to rise
up. They burn police stations, they plant bombs, they burn
customs warehouses.”

‘Set Up’

The Governor of La Guajira, Juan Francisco Gomez, was
arrested in October and accused of conspiracy to commit crimes
and involvement in three homicides. Alfredo Montenegro, a lawyer
for Gomez, says his client pleaded innocent.

Three of the past five governors of La Guajira have been
forced to leave their posts before finishing their mandate,
according to the Mision de Observacion Electoral, a Bogota-based
pro-transparency group, and Corporacion Nuevo Arco Iris, a think
tank that monitors Colombia’s conflict.

A crackdown on money laundering by Colombian banks means
some cocaine-smuggling groups prefer payment in gasoline rather
than cash, which they sell at gas stations that they control,
Ortega said.

Fuel Taxes

Gasoline costs about 6 U.S. cents a gallon at the official
exchange rate in Caracas, the cheapest in the world, and about 1
cent per gallon at the black market rate. That compares with
about $4.30 in Bogota and an average of $3.27 in the U.S. About
70 percent to 80 percent of the roughly one million gallons of
gasoline smuggled into Colombia every day comes from Venezuela,
and most of the rest from Ecuador, according to Ortega.

Venezuela, which has the world’s largest oil reserves,
subsidizes fuel to help low-income earners, maintain social
stability and contain inflation that reached 54.3 percent in
October.

Fuel tax collected by Colombia’s government fell 16 percent
this year, even as auto use increases in line with economic
growth, according to Ortega. The economy expanded 4.2 percent in
the second quarter from a year earlier, compared with 3.3
percent in Brazil and 1.6 percent in Mexico, Latin America’s two
biggest economies.

Cerrejon Alerted

The border region is also home to Cerrejon, Colombia’s
largest coal mine, jointly owned by BHP Billiton, Anglo American
and Glencore Xstrata. Ortega said he alerted Cerrejon that one
of its contractors was buying smuggled gasoline.

Cerrejon itself is paying full price for its fuel, and
isn’t profiting from the trade, the operating company said in an
e-mailed response to questions. The mine has opened an internal
investigation after being made aware of the matter by the DIAN,
it said. The three owners referred questions to Cerrejon.

“The criminal gangs are getting stronger,” Colombia’s
Mines and Energy Minister Amylkar Acosta, who’s from La Guajira,
said in a Nov. 18 interview in Bogota. “Contraband, like drug
trafficking, has become the fuel of these gangs. As long as the
difference between the price there and the price here is so
large, there will always be an incentive for contraband.”